Major office development planned for St. Charles

(Crain's) -- A little-known real estate firm is starting construction on a planned 50-acre office park in St. Charles, a far western suburb known for the Pheasant Run Resort & Spa but not commercial development.

The three-building first phase of the $100-million project, called the Corporate Reserve of St. Charles, will have about 75,000 square feet, increasing the total amount of office space in the bedroom community by about 40%, to 192,000 square feet.

The developer, Chicago-based JCF Real Estate Inc., says the project near Randall Road and State Route 64 could eventually grow to 600,000 square feet of office space, plus restaurants and possibly a hotel.

John J. Fitzmaurice, JCF founder and principal, admits there's some risk to building the largest commercial development in St. Charles when the economy is slowing and credit remains tight. He is developing the first three office buildings on spec -- or without first securing a tenant. Mr. Fitzmaurice says he'll wait until the first phase is leased before adding more office space.

"Whether that takes three months or six years, we'll see," he says. "I think there's demand out there."

Nestled along the Fox River, St. Charles attracts tourists to the Pheasant Run resort but not many companies. About 30% of the city's current 117,000 square feet of office space is unoccupied, according to real estate research firm CoStar Group Inc.

Including neighboring Geneva and Batavia, there is nearly 1.3 million square feet of office space, with a vacancy rate of nearly 19%, CoStar says.

The most recent addition to the St. Charles office market is a single-story office building at 40W201 Wasco Road, which was built last year. The nearly 14,400-square-foot structure is nearly 57% leased, CoStar says.

Some observers candidly doubt there is enough demand to support additional development.

"St. Charles is all local tenants," says Eric Wickman, president of Wickman Brokerage Inc., a St. Charles-based real estate firm. "It's not like Oak Brook. It's a real small market."

Mr. Fitzmaurice says a lot of business owners and executives live in St. Charles, and he hopes to entice them to lease space closer to home -- at his development.

He says the project will appeal mostly to small to mid-size tenants that could lease up to 15,000 square feet, but there are also opportunities for build-to-suit tenants wanting 50,000 to 100,000 square feet.

Founded in 1993, JCF owns or manages about 500,000 square feet of office space in the Chicago area. The company has had success in the past with smaller to mid-size office projects, such as the Interpark Office Complex it owns at 8601-8623 W. Bryn Mawr Ave. in Chicago. The 12-building, 165,000-square-foot complex has been above 90% occupied since JCF acquired it in 2001 for $12.65 million.

JCF plans to begin construction this month on the Corporate Reserve's $25-million first phase. The cost includes site work for the entire development. Two of the three buildings in the first phase are to be 15,000 square feet, and the third is to be 45,000 square feet. They could be available for occupancy next year.

JCF paid $12 million May 8 for the 50 acres, which are largely vacant. The seller was Cardinal Industries Inc., a St. Charles-based manufacturer of lamination products. Gerald Sheridan Jr., who is listed on public records as the company's president, wasn't available for comment.